Senator the Hon Mathias Cormann
Minister for Finance
DAVID LIPSON: G’day there. Good to have your company this morning. On the program today, a crack down on foreign investors who break the rules and should we revisit Australian aid to Indonesia after the Bali Nine executions? But first, the Government’s plans to reduce the rate of indexation for the aged pension was one of the biggest savings measures of last year’s Budget, worth $23 billion over 10 years. It was also one of the most unpopular among a litany of unpopular measures. After enduring almost a full year of political pain, reports today suggest the Government has officially given up and is looking in other areas to save money. Well, joining me now to discuss this and the other stories of the day, the Finance Minister Senator Mathias Cormann. Thank you for your time as always.
MATHIAS CORMANN: Good to be back.
DAVID LIPSON: Is the Government abandoning plans to change the indexation for the pension?
MATHIAS CORMANN: David, the Budget will be delivered by the Treasurer on the second Tuesday in May. I am not in a position to deliver the Budget for you here today on your program.
DAVID LIPSON: Why not? It’s in the papers today.
MATHIAS CORMANN: What I would say is that the papers don’t deliver the Budget either. It will be the Treasurer on the second Tuesday in May. What I can say by way of a more general comment is that over recent weeks, the Expenditure Review Committee has reviewed the progress that we have made since last year’s Budget in putting Australia on a stronger foundation for the future, repairing the Budget mess that we inherited from our predecessors. We have also reviewed those issues that remain outstanding and to what extent there is a better way forward to achieve our objectives. The detail on how we propose to do all of that will be part of the Budget on Tuesday 12 May.
DAVID LIPSON: Sure, the pension indexation changes as I mentioned, to save $23 billion over 10 years, if that doesn’t go ahead, you would imagine Scott Morrison would have to find equivalent savings. That is what you have said, or what the ERC has said to all the other Ministers.
MATHIAS CORMANN: Two points here. Firstly our aged pension is a very important safety net and our commitment is to ensure that as a safety net for many Australians it remains sustainable over the medium to long term, indeed forever. Our focus continues to be on making sure that safety net remains sustainable. The second point is, you are quite right that wherever we have made judgements in this Budget, as in the previous Budget and indeed in the Mid-Year Economic and Fiscal Outlook, to increase spending on certain areas because in our judgement that was required, we have set out to more than offset that additional spending by more than enough savings in other areas of Government. So that is very much the approach that we have taken in this Budget as well. Wherever there is a need for new spending, we have gone out of our way to more than offset that by new savings in other areas.
DAVID LIPSON: Would the Government consider reversing Peter Costello’s moves in 2006 where he halved the taper rate for the pension? If that happened, as suggested in the Financial Review today, well that would see people on the part pension perhaps lose some of that pension or all of that pension, but full pensioners, those from less wealthy backgrounds or without as much savings would not be impacted. Is that the sort of thing that the Government is looking at?
MATHIAS CORMANN: David, I am being as helpful as I possibly can be, but I’m not going to deliver the Budget for you today.
DAVID LIPSON: Okay, well, I suppose assuming that these reports are correct and they are in several different publications, one in The Australian and one in Fairfax, is that an admission, or would the Government ever admit that the attempts to change pension indexation were not fair, that was the accusation that was levelled at the Government through much of the last year.
MATHIAS CORMANN: When we came into the Government we inherited a very challenging situation. The economy was weakening, unemployment was rising, the spending growth trajectory we inherited was manifestly unsustainable, the Budget position was rapidly deteriorating. So we have been working very hard since September 2013 to turn that situation around. To strengthen growth, strengthen job creation and to get our Budget back under control. In our first Budget we did go quite hard in trying to get our Budget back under control, to get our spending growth on a sustainable foundation for the future. We have already said previously that with the benefit of hindsight, we probably did try to do too much at once. We have reflected on that as we have put together our second Budget. We have, we believe, taken a responsible, fair and measured approach to building on the progress we have made since last year’s Budget, but focussing at all times on the things we need to do to put Australia on a stronger foundation for the future, strengthening growth, strengthening job creation and getting our Government finances back under control.
DAVID LIPSON: One more crack at this before I move on. I’ll put it another way. Is the Government still fully committed to those pension indexation changes?
MATHIAS CORMANN: The Government is fully committed to making sure that our important pension system is sustainable for the medium and long term because it is an important safety net for many Australians.
DAVID LIPSON: Okay, also reports today of incentives for employers and for older workers to try and encourage people to stay in the workforce for longer. Why is that necessary?
MATHIAS CORMANN: If you look at the Intergenerational Report you will see that the proportion of the working population as a proportion of those Australians of traditional retirement age 65 years and over continues to decline. So we have fewer and fewer working taxpayers as a share of the population that is in retirement. As we live longer and longer, and longer healthier, to ensure we slow down that decline we do need to encourage more Australians to work longer. Essentially to ensure that our very important welfare services, our very important welfare support remains affordable for taxpayers and remains affordable in the economy.
DAVID LIPSON: What about the Families Package? That’s going to be a centrepiece of the Budget. It’s going to see, we know, some help for childcare, a pilot program for nannies, it was announced this week and other areas as well. Can you explain how that is going to be funded? Will it come entirely from the dumped paid parental leave scheme? Or will there have to be other money that will have to contribute to that as well?
MATHIAS CORMANN: The Prime Minister has already said that we will not be proceeding with the enhanced paid parental leave scheme that we took to the last election. So that does free up quite a few resources, which we have already said we would redirect into helping families get more affordable access to high quality childcare ... interrupted
DAVID LIPSON: How much resources exactly does it free up?
MATHIAS CORMANN: The specific numbers will be revealed in the Budget. But to answer your question directly, our focus with our childcare package is to give families more choice, to help families with both parents in work. To help women rejoin the workforce, stay in the workforce as they have young children. It is a very important part of our overall economic plan. All the additional funding in relation to it is more than fully offset from savings in other parts of the Budget. Where that exactly comes from, all of that detail will be revealed in the Budget.
DAVID LIPSON: We also see today the Prime Minister is going to announce a crackdown on foreign investors who break the rules in the Australian property market. Big fines, jail terms as well. Is Australia still open for business?
MATHIAS CORMANN: We absolutely are open for business and foreign investment is very important. We do welcome foreign investment and indeed since our election to Government, there has been a massive increase in the level of foreign investment into Australia. But we also understand that it is very important that the public can have confidence that the foreign investment coming into Australia is not contrary to our national interest. That is why we do have to have a framework in place that applies proper scrutiny. We have made some commitments in the lead up to the last election on changes we would make in this area. We’ve gone through a public consultation process and we’ve made some decisions as a result of both those things on how the current framework can be strengthened. The problem is that under the previous government many of the existing provisions, many of the existing safeguards weren’t properly enforced. What we are doing is really give people confidence, that wherever there is foreign investment that will be contrary to the national interest it will not be able to proceed.
DAVID LIPSON: There’s a lot of anecdotal evidence about foreign investors squeezing out locals when it comes to auctions, particularly in housing markets like Sydney and Melbourne. But does the Government rely on more substantial data than that? Where is the evidence that this crackdown is needed?
MATHIAS CORMANN: Again, foreign investment is very important. For us to reach our full economic potential, for us to continue to strengthen economic growth and strengthen job creation into the future, we will continue to need very significant capital inflows from overseas. As I’ve indicated to you, in the period since our election to Government the level of foreign investment into Australia has gone up by a very significant amount. From 2012-13 to 2013-14 it increased by nearly 25 per cent. Having said that, of course there are areas where the level of foreign investment can have more sensitive implications in our market and we have to have a capacity to make judgements on whether or not a particular foreign investment approach is, or is not contrary to our national interest. We’ve got to be able to make judgements to stop foreign investment that is not in our national interest.
DAVID LIPSON: Okay, well moving on, we saw two Australians executed in Indonesia this week. Australia does support the Indonesian justice system through aid to the tune of $55 million a year, that’s part of a $600 million in aid that we give Indonesia. With the Budget in such a difficult position, should aid be revisited in response to the executions we saw this week? Should we be supporting a justice system that has put two of our citizens to death?
MATHIAS CORMANN: There are two different things here. Firstly, our relationship with Indonesia went through a very difficult period in this past week. Having said that it continues to be a very important key relationship and we will work to ensure that, as quickly as possible, we go back to where we were before the events of this past week. In relation to aid, the Government made some significant savings in the aid budget in last year’s Budget and in the Mid-Year Economic and Fiscal Outlook before Christmas last year. The specifics on how that is allocated to which country, these are really matters for the Foreign Minister. As the Foreign Minister has already indicated she will be providing some detail in relation to that in the context of the Budget on the second Tuesday in May.
DAVID LIPSON: The Foreign Minister said yesterday and you mentioned the relationship and the importance of it, that well, it’s time for us to seek to move on. We need to build relations at a Government level and at a people level and look at the long term future of the relationship. What do you make of those comments, is it time to move on? It’s only a few days since the executions took place.
MATHIAS CORMANN: Julie Bishop is absolutely right. I think Julie Bishop has handled what is a very difficult set of circumstances exceptionally well. It was clearly a difficult week in our relationship this past week. But our relationship with Indonesia, our relationship with the Indonesian people, is a very important key relationship and we do need to focus on getting ourselves back into the strongest possible position in the context of that relationship as quickly as possible. That is what the Australian Government will be doing.
DAVID LIPSON: Just finally, Laurie Oakes today is suggesting in his column today, that the Government, the Prime Minister in particular, is considering a snap election after the Budget if things go well for the Government. Is that under consideration?
MATHIAS CORMANN: I’ve read those comments. Let me unequivocally reassure you that our intention is to serve our full term. We still have a lot of work to do to put Australia on a stronger foundation for the future. That is what all of us are focused on. That is what I’m focused on. There’s a lot of work still to be done before the Budget on the second Tuesday in May.
DAVID LIPSON: So you wouldn’t like to go back into election mode in a few weeks time?
MATHIAS CORMANN: We are always accountable to the Australian people. But right now we have got a lot of work to do. The next election is due in the second half of 2016. My focus, the focus of my colleagues, the focus of the Prime Minister, the Treasurer and everybody in the Coalition team is doing the best we can every day to put Australia on a stronger foundation for the future.
DAVID LIPSON: Finance Minister, Senator Mathias Cormann, great to speak to you as always this morning and all the best for the couple of weeks ahead.
MATHIAS CORMANN: Always good to talk to you.
DAVID LIPSON: A big few weeks for you leading up to the Budget. Thanks again.
MATHIAS CORMANN: Thank you.